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Fuel Surcharges
Somebody is getting them, and it should be YOU!!!


Diesel and fuel prices have risen considerably, but freight rates stay the same. How does an owner operator or independent trucker manage? The answer... A fuel surcharge. A fuel surcharge is a fee that can be added to the freight charges that allows the hauler to be reimbursed for excessive fuel costs incurred in the performance of hauling freight from one point to another. This assessment doesn’t require governmental approval and you do not need to file an application with DOT to implement a fuel surcharge.

The Facts!!!

If you are brokering your own freight, you are losing money if you are not assessing a fuel surcharge. Everyone else is applying it, why are you giving up your money?

If you are using a broker, ask them if they are assessing a fuel surcharge on the loads you're hauling for them.
A. If yes, have they been paying it to you, or keeping it for themselves? Then you need a new broker, because this guy is screwing you!
B. If no, then you need a new broker because this guy is killing you!

Freight Brokers are NOT ENTITLED to a percentage of the surcharge, in that it is a reimbursement of actual fuel expenses incurred!

Here’s how you get started!

Notify your broker that you expect a fuel surcharge for hauling his freight. You should also let him know that you know how to compute the surcharge (shown below). If he dodges the issue or makes excuses, you need to find another broker!

If you are brokering your own loads, then notify your customers. You can notify your customers with a faxed memo or letter. You can use the generic letter at Surcharge Letter , all you need to do is replace the customers Name and Address information and date in the appropriate places, put your name at the bottom, sign it, and off you go!, or, you can copy and paste the content of the letter and paste it onto your letterhead. (The letter was written using Microsoft Word.)

Calculate your own fuel surcharge. It’s easy.

A fuel surcharge should be based on your actual fuel costs, wherein you will make your fuel receipts available with your request for reimbursement of fuel charges. You fuel purchases should have been made at locations that were competitively priced, and close in price to the average retail price of diesel fuel in the region of origination, or where you picked up your load, on the date you picked up that load. (This average retail price information, collected by the federal government's Energy Information Administration, is updated every Wednesday. The information is available by phone by calling (202) 586-6966 or you can go to their Web site: http://tonto.eia.doe.gov/oog/info/wohdp/diesel_detail_report.asp)

Here's an example for the week of 9/27/2004, (we will use average pricing in our example):

Weekly On-Highway Diesel Prices - Retail ($ per gallon, including all taxes)

9/27/2004 This will be your fuel surcharge per mile you should get this week*

Region
Avg
Price
Benchmark
Price
Increase
Per Gallon
Average
MPG
Surcharge
Per Mile
New England
(CT, ME, MA, NH, RI VT)
2.102
1.10
1.002
5
0.2004
Central Atlantic
(DE, MD, NJ, NY, PA & DC)
2.092
1.10
0.992
5
0.1984
Lower Atlantic
(FL, GA, NC, SC, VA, WV)
1.981
1.10
0.881
5
0.1762
Midwest
(IL, IN, IA, KS, KY, MI, MN, MO,
NE, ND, SD, OH, OK, TN, WI)
1.982
1.10
0.882
5
0.1764
Gulf Coast
(AL, AR, LA, MS, NM, TX)
1.971
1.10
0.871
5
0.1742
Rocky Mtn.
(CO, ID, MT, UT, WY)
1.999
1.10
0.899
5
0.1798
West Coast
(AL, AZ, CA, HI, NV, OR, WA)
2.169
1.10
1.069
5
0.2138
The actual price paid per gallon, minus the Benchmark price, divided by your actual miles per gallon, gives the surcharge rate, multiplied times the miles driven which gives the fuel surcharge amount you should recover.


These fuel surcharges are:
•Designed to reimburse you for increased fuel costs experienced in the process of moving freight from one point to another, and are not designed to be a profit center;
• based on the actual prices paid for fuel (average prices are a guideline for acceptable fuel prices in each region for the week indicated.)
• Based on the actual actual milage you get when operating your truck should be used for the calculations, as the fuel surcharge is designed to reimburse you for fuel costs, not to be used as a profit generator;
• the difference between the actual price you paid for a gallon of fuel and the benchmark price of $1.10 per gallon;
• a cost of shipping, not a cost of hauling.

To calculate the "per mile surcharge":

To maintain your required level of profitability, you should begin imposing a fuel surcharge when the price of fuel goes above $1.10 per gallon. You must assume that your basic freight rates cover your costs when fuel is $1.10 and lower. When the price exceeds $1.10 per gallon, you should impose a fuel surcharge to recoup those higher costs.

The formula that AITA recommends to calculate the surcharge for increased fuel costs is designed to reimburse you for increased fuel costs.

You need the following information:
• The total miles from point of origin to destination;
• The average miles per gallon for your truck ( Our example will use 5 mpg);
• The average price of fuel for that day in the region where you pick up the load (check the EIA at the web address above) Our example will use $1.669 per gallon
Most motor carriers use an average benchmark fuel price of $1.10 per gallon

Now do the math

Increased Fuel Costs:
Compute your increased fuel costs per gallon used: Subtract the Benchmark price from the Actual Price paid for your fuel, or, in our example, $1.669 - $1.10 = $0.569 or 56.9 cents per gallon.

The increased cost of fuel per gallon is 56.9 cpg

Miles Per Gallon:
Compute the efficiency of your truck. Divide the distance you travel between fill ups by the number of miles traveled, yielding the average miles per gallon. Example, if you travel 1787 miles and used 344 gallons of fuel, you averaged 5.2 miles per gallon.

Compute the fuel surcharge per mile:
Divide the miles per gallon figure into the increased cost per gallon, which gives you the "per mile surcharge". Our example is 5.2 mpg into 56.9 cpg which equals 10.9 cents per mile surcharge.

Total Fuel Surcharge:
Multiply this "per mile surcharge" times the total miles driven, and you get the total fuel surcharge amount to be assessed the shipper. Our example is 10.9 cpms times 1787 miles equals $194.78 for the load.

Remember:
You do not need to get government approval
You do not need to file an application with DOT to implement a fuel surcharge.
If you’re not charging a fuel surcharge, you are supplementing the shipper;
If your broker is not paying you a fuel surcharge, he probably owes you a kiss, because he has surely been screwing you.